Historically the difference between gross lending and capital repayment produced significant increases in net lending each month.
With declining levels of gross lending and a rising trend in capital repayment, resulting in part from low interest rates, this difference has largely disappeared.
June’s approvals numbers were affected by the Diamond Jubilee celebrations, Euro 2012 and the wet weather.
House purchase approvals were 20.5% lower than a year ago.
The average house purchase approval is £166,600. Figures for 2012 are not directly comparable with 2011 due to expanded reporting within one banking group.
Numbers of remortgaging approvals were some 42.9% lower than in June 2011 and approvals for other secured lending were 27.4% lower.
Outstanding unsecured lending contracted by 2.3% over the 12 months to June.
Personal deposits rose by 5.1% over the 12 months to June boosted by strong inflows continuing after the start of the ISA tax year.
High street banks saw £16.1bn flow into cash ISAs in the first half of 2012 compared with £10.2 bn. in the first half of 2011.
BBA statistics director David Dooks said: "Public holidays and wet weather put a dampener on mortgage approvals in June and demand for unsecured household borrowing was also low.
“Paying off loans or overdrafts and building up deposits is the current consumer ambition.
“Business output remains weak so demand for finance is subdued with companies tending to delay investment and concentrate on reducing their bank debt.”
Ben Thompson, managing director Legal & General Mortgage Club, said: “It is pleasing to see the BBA reporting a 0.9% increase in net mortgage lending from banks in June even if the increase is relatively modest. The recent efforts of the Bank of England and The Treasury to create the right conditions for lenders to lend via the Funding for Lending Scheme (FLS) have to be applauded and will hopefully help to increase volumes throughout 2012 and into 2013.
"However , the scheme is likely to benefit one section of the market. As lenders aren't required to change their lending criteria, it will be those who are already able to secure loans that will stand to gain the most. First time buyers are unlikely to see any immediate benefit. That said, the key plus point is that many lenders now have the option to borrow money cheaply encouraging greater net lending as a result, and essentially increasing the level of price competition all round. Whilst lenders have no obligation to lend more, they will receive financial recompense if they do which will only serve to make lending a more attractive option.
"The Funding for Lending Scheme is probably the most interesting step taken by the government since 2007 to generate the right conditions for lenders to do what they traditionally do best, i.e. lend and hopefully we will continue to see more positive lending figures as we move into the second half of 2012.”
And Nick Hopkinson, director of PPR Estates, added: “This month’s downbeat assessment of the mortgage market by the British Bankers’ Association marks an almost contrarian moment of honesty from the sector.
"Mortgage and commercial lending continue to shrink while savers desperately struggling to beat inflation have put almost 60% more so far into their cash ISAs than last year. Stocks and equity-related investments remain a high-risk roller-coaster for all but the professional investor and mortgages are being severely rationed so most savers have little alternative than an ISA if they don’t want to risk losing all their money these days.
"Depressingly however most ISAs are guaranteed to lose you money after inflation has had its way but at least you’ll be going financially backwards a little slower.
“House prices will remain under downward pressure for the foreseeable future while the banks struggle to hide their massive losses from the pre-2008 property bubble.
"Only the millionaire-driven market in Prime London houses will buck this price trend as a separate bubble grows amongst international buyers seeking a ‘safe haven’ investment. While this will mask the national figures, it will be of no help to most parts of the UK’s struggling housing market till the credit crunch unwinds properly. Nobody really knows how long this will be – my guess is a lot longer than most people may wish.”
